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Investors shun Manchester United stock offering

Manchester United&rsquo;s long-awaited initial public offering (IPO) on the New York Stock exchange was as hotly anticipated and heavily hyped as a UEFA Champions League final.

Manchester United Executives Joel Glazer (R) and Avram Glazer (C) arrive to ring the Opening Bell at the New York Stock Exchange on August 10, 2012 in New York City. Manchester United shares started trading at USD 14.05 at the opening of the New York Stock Exchange.
( NYSE Euronext) (Handout / GETTY IMAGES)

Manchester United’s long-awaited initial public offering (IPO) on the New York Stock exchange was as hotly anticipated and heavily hyped as a UEFA Champions League final.

But the debut of Manchester United as publicly traded company was about as exciting as a nil draw in a preseason friendly.

Shares of the team hit the market at $14 (U.S.), down from the $16 to $20 the club had initially planned to seek. The share price values the club at $2.3 billion (U.S.).

Throughout trading Friday the price of one of the most talked-about stocks of the year barely budged however, peaking at $14.20 before closing at $14.05. The stock trades under the ticker symbol MANU.

The price reduction combined with the utter lack of activity left many experts underwhelmed.

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“There was a lot of wing flapping, but not much flying today,” said John Fitzgibbon, the founder of IPOScoop.com told the Associated Press. “It’s reflective of the overall IPO market, they may hit a couple of roadbumps, but the deals are getting done.”

One analyst said the flat opening is a signal that individual investors, who are typically attracted to well-known name brands on the market, are paying more attention to valuation and price.

"The bigger story confirms that individual investors felt so burned by the market — having been burned twice, by the financial crisis and then by Facebook — that they're not willing to get burned again," said Sam Hamadeh, CEO of PrivCo LLC, which researches privately held companies.

When the club, which bills itself the most famous soccer club in the world, first proposed the idea of an IPO in Singapore, speculation raged that the move would raise as much as $1 billion (U.S.) in much-needed cash.

The U.S.-based Glazer family bought Manchester United for $1.47 billion (U.S.) in 2005 but only after borrowing heavily, and according to their filing with the U.S. Securities and Exchange Commission the club still owes creditors more than $481 million (U.S.).

Last month, the club finally moved ahead with plans for a New York IPO, making clear in its initial SEC filings that it intended to pay down debt with the money raised in the stock sale. But in a subsequent filing, the Glazers altered their plans, explaining that only half of the influx of cash would go toward the debt and the rest toward club ownership.

But the lump sum the club will now split between ownership and obligations to creditors is much smaller than expected.

Lowering the stock price to $14 cut the IPO’s haul to $223.3 million, a modest number compared to the sums discussed when the IPO was first considered, and vindication for a growing group of Man U fans vocally opposed to the deal.

“It would seem all the analysis of the true valuation was correct - the Glazers and their advisors were being far too ambitious - or perhaps greedy,” said a statement issued by the Manchester United Supporters Trust (MUST).

The company “was asking investors to pay a pretty high price and take on a lot of risk,” said Morningstar Inc.’s Kenneth Perkins. “It could work out, but the risk is to the downside.” Perkins, a consumer stock analyst, values the stock at about $10 a share.

The Glazers will maintain almost 99 per cent of the voting control, according to the original terms of the prospectus, because the Class B shares they own carry 10 votes apiece, compared to 1 vote each for the Class A shares being sold in the IPO.

Nike pays around 25 million pounds a season to Manchester United and its contract runs through 2015. United’s commercial business has grown 57 per cent to more than 100 million pounds since 2009.

This month, United signed the biggest jersey agreement in soccer with General Motors Co.’s Chevrolet brand. The agreement will generate $559 million (U.S.) through 2021.

Real Madrid, the Spanish soccer club founded in 1902 that has a record nine European Cup/UEFA Champions League titles, is the second-most valuable sports franchise at $1.88 billion (U.S.), according to Forbes.

The New York Yankees, which have won the World Series 27 times, are the world’s third-most valuable sports franchise at $1.85 billion.

Still, Man U upper management worked to spin Friday’s trading as a sign of progress, pointing out that U.S. investors bought most of the Man U shares sold on Friday.

“The understanding that U.S. investors have around sports business, given it’s the most developed sport market in the world, has been a benefit,” said vice chairman Edward Woodward in an interview with Bloomberg.

Except that sports stocks historically haven’t performed well on U.S. markets.

In 1998 the Cleveland Indians offered their stock for public sale, the price dropping from $15 to $14.75 on the first day of trading. The Florida Panthers and Boston Celtics also had brief, lackluster runs on the public market before going private again.

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